The Ontario Superior Court of Justice recently issued a decision regarding the ability of arbitral creditors to seize assets of state-owned entities. The decision in Belokon v Kyrgyz Republic(1) follows a line of decisions from Ontario courts regarding Stans Energy Corp and other arbitral creditors' attempts to seize shares in Centerra Gold Inc (an Ontario company) held by Kyrgyzaltyn JSC, an entity owned by the Kyrgyz Republic (for further details please see "Lessons on using Mareva injunctions to execute international arbitral awards").(2)

This decision serves as a reminder of some of the difficulties arbitral creditors may face in collecting amounts owed under foreign arbitral awards. Even where an award has been recognised and enforced, the location and ownership of assets may frustrate creditors' ability to execute in Canada. Notably, Stans's award against the Kyrgyz Republic has not been successfully recognised and enforced – the award was overturned at the seat, and there is a hearing pending on enforcement. Stans also commenced a United Nations Commission on International Trade Law proceeding against the Kyrgyz Republic in January 2016.


The facts of the cases involving the Kyrgyz Republic's largest gold mine are well-known to international arbitration practitioners. The Kyrgyz Republic is home to a large mining concession known as the Kumtor Gold Mine, which is owned by Kumtor Gold Co. Kumtor Gold Co is in turn wholly owned by Centerra Gold Inc. Kyrgyzaltyn JSC, a joint stock company wholly owned by the Kyrgyz Republic, owned 32.7% of the shares in Centerra as of the date of this decision.

The Kyrgyz Republic is defending several arbitral enforcement proceedings. In four such disputes, the arbitral creditors have attempted to execute on their awards in Ontario by seizing Kyrgyzaltyn's shares in Centerra Gold Inc. The Kyrgyz Republic's defence is that it does not have an exigible ownership interest in Centerra's shares. The Ontario Superior Court of Justice opted to hear all four applications jointly to avoid inconsistent decisions.

The applicants argued that the state's ownership interest in the shares was apparent from a 2009 agreement, through which Kyrgyzaltyn acquired 15.7% of its shares in Centerra. The recitals to the agreement included the phrase "Kyrgyzaltyn, which holds shares in Centerra on behalf of the Government" and referred to Kyrgyzaltyn and the Kyrgyz Republic collectively as the 'Kyrgyz Side'. Conversely, the respondents (including Kyrgyzaltyn and the Kyrgyz Republic) argued that Kyrgyzaltyn was independent from the Kyrgyz Republic, and that the state's interest in the shares was limited to its shareholding in Kyrgyzaltyn.


The court reviewed the agreement and concluded that "if the parties had intended the Government to be the owner of all of these Centerra shares, they would not have done so on the strength of a few words and a definition contained in a recital". Noting that the operative sections of the agreement stated that Kyrgyzaltyn was to be the registered and beneficial owner of the shares, the court held that the parties' intentions, as reflected in the language of the agreement, were unambiguous with respect to the ownership of the shares.

Notwithstanding the court's conclusion that the parties' intentions were unambiguous and that external evidence was irrelevant, the court went on to comment on extrinsic evidence led by the applicants (Resolution 254 and Decree 1141-IV). Resolution 254 authorised Kyrgyzaltyn "on behalf of the Government of the Kyrgyz Republic" to receive and hold the Centerra shares "which are owned by the Government of the Kyrgyz Republic", while Decree 1141-IV stated that the shares were "to the benefit of the Kyrgyz Republic". The court commented that the wording was not conclusive, because it was equally consistent with the fact that the Kyrgyz Republic had increased its stake in Centerra through its shareholding in Kyrgyzaltyn.

The court similarly dismissed the Kyrgyz Republic's conduct, which included the establishment of a working group to address issues relating to the sale of Centerra shares and an order that the proceeds from the sale of Centerra shares be assigned to the state budget, as being evidence of the state's ownership of Centerra shares. The court was not persuaded that the parties intended for the Kyrgyz Republic to own the shares and accepted that the Kyrgyz Republic understood that Kyrgyzaltyn was a fully operating entity and that it had no propriety interest in the shares.

The court then considered the applicants' alternative argument – again based on the agreement and Resolution 254 – that Kyrgyzaltyn held the Centerra shares in trust for the Kyrgyz Republic. The court rejected this submission on the same grounds, emphasising that the language was consistent with the parent-subsidiary relationship between the Kyrgyz Republic and Kyrgyzaltyn and did not reflect intent by Kyrgyzaltyn to grant a beneficial interest in the shares to the state. The applicants' further argument that the shares were held on a resulting trust was also dismissed in light of the explicit language in the agreement confirming that Kyrgyzaltyn was the beneficial owner of the shares.

The court concluded by confirming that the Kyrgyz Republic had no "equitable or other right, property, interest or equity of redemption" in the Centerra shares and dismissed the application, denying each of the applicants the right to seize the shares in executing on their arbitral awards.


Belokon v Kyrgyz Republic provides a reminder to arbitral creditors and counsel to consider a strategy for attaching arbitral debtors' assets well in advance of enforcement proceedings.

In this case, the location of the Centerra shares in Ontario and the connection between the state and Kyrgyzaltyn was insufficient to overcome clear wording in the agreement regarding the legal and beneficial ownership of the shares, denying the state's arbitral creditors the right to seize those shares in the execution of their awards.

It remains to be seen whether the parties will appeal this decision.

For further information on this topic please contact Sarah McEachern or Kalie McCrystal at Borden Ladner Gervais LLP by telephone (+1 604 687 5744) or email ( or Borden Ladner Gervais LLP website can be accessed at


(1) 2016 ONSC 4506.

(2) Also see 2014 ONSC 6195; 2015 ONSC 42; 2015 ONSC 3236.

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